Will the Democratic Party Finally "Get Right" on Trade?

Hillary Clinton and Barack Obama discuss exiting from NAFTA in the 2008 Cleveland debate

by Gaius Publius

The mainstream wing of the Democratic Party, it seems, has not learned the lesson of "job-killing trade deals" since the last election. But all is not lost on the subject trade. If Trump gets his way — yes, this is a positive story about a Trump policy — the country may see the end of something that should never have been started in the first place.

The Trump administration is threatening to kill NAFTA. Will the threat succeed? Will Democrats as a group find a way to benefit if it does, or will they make matters worse for themselves? Let's take a look.

Trump, NAFTA and the Democratic Party

There are several moving parts to this story, and it's important to keep them straight. Those parts are:

     • The Trump administration really does want to alter much of the NAFTA trade deal — and for the better. This is one campaign promise he appears to mean to keep.

     • Pro-corporate "free trade" groups like the Chamber of Commerce are strongly opposed to many or most of the changes the administration is proposing.

     • A stalemate over Trump's NAFTA proposals may force the president to terminate NAFTA entirely by invoking Article 2205.

     • Trump does indeed have unilateral authority to do this, despite critics who claim he doesn't and despite the act of Congress that enabled NAFTA in the 1990s.

     • If Trump cancels NAFTA, it will be a VERY GOOD THING for the country. Everyone who supports the good of the country should applaud.

     • Pro-"free trade" Democrats — meaning most of them, especially the pro-corporate Clinton and Obama wings — may try to save NAFTA under the guise of "Resistance" to Trump.

     • Or not. Thus the crux of the problem for mainstream Democrats.

In the interest of brevity, I'm going to quote just briefly to support these main points. But don't be confused — this is a very big deal, and it deserves lengthier supporting analysis than most readers may have time for.

Trump Is Trying to Improve NAFTA, and the World of Money Is Opposed

About the first two points above, consider this from Politico in October. Note the strong reaction against the administration's proposed improvements for NAFTA (my emphasis throughout):

Chamber calls many Trump administration NAFTA proposals 'dangerous'

The largest U.S. business group strongly urged the Trump administration Friday to withdraw a number of "highly dangerous" proposals in talks to renegotiate NAFTA and warned that pulling out of the pact would have disastrous consequences for many states that backed President Donald Trump in the election.

"Today, we’re increasingly concerned about the state of the negotiations," John Murphy, senior vice president at the U.S. Chamber of Commerce, told reporters. The comments come a few days before the United States will host Canada and Mexico for the fourth round of talks on renegotiating the nearly 24-year-old pact.

The Chamber has expressed concerns about certain proposals in previous trade agreements, but never on as many proposals as are currently under consideration in the NAFTA talks, Murphy said.

Many businesses, large and small, are concerned about the effects that many of the Trump administration proposals or planned proposals would have on trade. Those at issue would reduce Canada and Mexico's access to the U.S. government procurement market, create a new domestic content provision for autos and tighten regional content requirements, and automatically terminate the agreement after five years unless all three countries agree to renew the pact — known as a sunset clause. ...

"I would say the vast majority of the U.S. business and agricultural community opposes these proposals broadly and emphatically," Murphy said.

The short list of proposed changes above should give a sense of the scope of the administration's proposals. There are other proposed changes as well, many just as troubling to folks like the Chamber of Commerce.

Confirmation that Trump may be serious comes from the WSJ (subs. required). If you click through, ignore all the pro-"free trade" editorializing in the language of this report and focus on the data it contains:

The politics of trade are shifting in Washington. In the 1990s, a Democrat in the White House, Bill Clinton, worked with free-market Republicans in Congress to open the world trading system to Mexico and China. [Notice the glorifying language, despite this.] Now a White House Republican, Donald Trump, hopes to work with trade skeptics among the Democrats to reverse that trade liberalization. It is too soon to say whether Mr. Trump will succeed. But if he does, it will be in alliance with people like [Sen. Sherrod] Brown, a leading voice among Democrats in the Senate against free trade agreements written in the past three decades.

Already Mr. Trump has halted the steady liberalization of trade that began with President Franklin Roosevelt and continued in Democratic and Republican administrations. In his first working day in office, he pulled the U.S. out of a 12-nation Pacific trade pact, even though the other nations continue working to complete a deal. In a recent speech in Vietnam he warned Asian powers that the U.S. wouldn’t “be taken advantage of anymore” in trade deals.

There's quite a lot of concern among those with money — from the standpoint of the public, drowned out by "Trump-Russia!" headlines — that he really is serious about this.

A Stalemate May Force Trump to Withdraw from NAFTA

Talk of the administration's desire to pass pro-populist changes to NAFTA isn't just talk. One can find articles excoriating them for it, or downplaying their efforts, in mainstream venues like Politico and the LA Times, all in response to Trump's single August comment that "I think we'll end up probably terminating NAFTA at some point." 

That threat is being taken, or presented, as either just a "war of words" or just a negotiating ploy. Those interpretations may still be right. But nothing has changed since that August pronouncement, signaling a remarkable consistency perhaps in an otherwise inconsistent administration.

Trump Has Unilateral Authority to Withdraw from NAFTA

If Trump does feel forced by this stalemate to withdraw from NAFTA, can he? Article 2205 of the NAFTA agreement clearly says he can:

Article 2205: Withdrawal

A Party may withdraw from this Agreement six months after it provides written notice of withdrawal to the other Parties. If a Party withdraws, the Agreement shall remain in force for the remaining Parties.

And if you listen to the video at the top, you see that candidates Clinton and Obama both agree that this is well within the president's authority. (At the time, both were saying that threat of withdrawal was a good thing.)

Global Trade expert Lori Wallach of Public Citizen Trade Watch, writing to her list, explains more fully:

Many people have asked me about whether Trump could withdraw from NAFTA solo. The answer is yes. And, because of provisions in NAFTA’s implementing legislation and the 1974 Trade Act, his doing so would terminate Congress’ 1993 approval of NAFTA and allow Trump to proclaim tariffs levels back to WTO ‘most favored nation’ levels. And as a Washington International Trade Association panel two weeks ago featuring pro-NAFTA folks, including a former Asst. USTR, agreed a court challenge of withdrawal would not likely succeed.

She continues, citing her analysis memo (pdf):

• A U.S. president has authority to notify other signatories that the United States is withdrawing from a trade agreement. Doing so, for instance by triggering the Article 2205 six-month notice to withdraw from the North American Free Trade Agreement (NAFTA), would end U.S. international law obligations under the pact. That alone would terminate some terms, such as U.S. consent to investor-state dispute settlement (ISDS), which are not covered in NAFTA’s implementing legislation.

•  Withdrawing from NAFTA would also terminate Congress’ approval of the pact and elements of its implementation. The NAFTA Implementation Act Article 109(b) cancels Congress’ approval of NAFTA and terminates five key provisions implementing aspects of it with respect to any country that withdraws.

• A president also has authority to switch [reverse] terms of trade – tariff levels – with Mexico and Canada without further congressional action. The Trade Act of 1974 Section 125 automatically terminates trade agreement tariff concessions in one year, but also provides presidents proclamation authority to revert tariff rates to World Trade Organization (WTO) Most Favored Nation (MFN) levels immediately with respect to any trade partner and any agreement if the United States withdraws or the pact terminates. With respect to Canada, the president could choose to extend duty free treatment by reversing the suspension of the 1988 U.S.-Canada Free Trade Agreement (FTA).

• In sum, absent congressional action via veto-proof majorities to alter the NAFTA implementing bill’s automatic sunset terms and the two existing congressional delegations of tariff authority to the president, not only can a president end U.S. international law obligations under NAFTA, but doing so would cancel Congress’ approval of the agreement and key elements of the implementing bill.

• NAFTA proponents have suggested that notice to withdraw from NAFTA would face legal challenges. It is unclear what party would be “injured” by such action in a manner that would provide standing to bring such a claim. However, even assuming that hurdle could be overcome, the likely outcome would either be a court declining to adjudicate on the basis that this type of issue is a “political question” or a ruling in support of unilateral presidential termination, given past practice and precedent.

If the standoff gets as far as unilateral NAFTA termination, expect Trump to dig in his heels and if necessary, defend his action in court. If he does that, expect him to win.

Note the deadline — NAFTA commitments are ended six months after the president declares them cancelled. That clock starts with the act of withdrawal, and runs even while the matter moves through the courts.

Though Cancelling NAFTA Will Be Good for the Country, Expect Most Democrats to Oppose It

This is where the actual rubber meets the actual road, and the above heading is my evaluation. I don't think anyone has forgotten the fight over Fast Track, during which pretend-progressive "free trade" Democrats like Ron Wyden and Earl Blumenauer shepherded TPP-enabling legislation to the floor, even while pretend-progressive leaders like Chuck Schumer and Nancy Pelosi tried to appear to be opposed or neutral regarding it.

Nor have many voters forgotten Barack Obama's desperate, all-hands push to pass TPP even after his preferred presidential candidate, Hillary Clinton, had finally come out against it. The push to pass TPP lasted until Trump was elected and the big money forces in Washington were forced to throw in the towel.

The mainstream (pro-corporate) media is pushing for NAFTA to remain as written — or be made worse — by incorporating elements of TPP into it. For example, the WSJ article linked above regularly uses terms like "trade skeptic" to describe opponents of what it glowingly calls NAFTA-style "free trade" and "trade liberalization." Earlier articles covering the Fast Track fight almost always described Democrats like Ron Wyden as "pro-trade" (not "pro-corporate-friendly trade") and opponents as "anti-trade"as though they hated trade in general — a blatant mischaracterization that crosses well into blatant propaganda.

The WSJ article also makes an early point of how marginal and alone Sen. Brown is on this issue, and how strong the pressure from Democrats is against him: "Mr. Brown opposes Mr. Trump on almost everything other than trade and is under pressure from his party’s liberal wing [sic] not to cooperate with the White House on any issue." (By "liberal wing" the Journal means the Chuck Schumer corporate wing — another blatant mischaracterization.)

Consequences

The near-term bottom lines in this story are several; they're also interesting. If Trump does pull the U.S. out of NAFTA, expect Democrats to be put on the spot, perhaps by design. At which point we should be asking these questions:

Will Democrats support NAFTA as the 2018 election approaches?

If they do, how will they couch their support? The country hated TPP by the time it died, though elites kept pushing it. The old pro-TPP rhetoric clearly didn't work then. Can it be effective now?

Will Democrats come up with a new story to convince suffering workers that NAFTA is now somehow good for them? Or will they just fall back on "Trump...Russia!" and hope no one will notice?

Will Sherrod Brown stay strong in his support for pulling out of NAFTA, if it comes to that, or will he fold to Party pressure?

Will other Democrats support him as this matter moves to a decision?

If so, which ones?

Much to watch for, and much that hangs in the balance. This is one of the major stories in the run-up to 2018. Expect none of your favorite "Trump-Russia" newscasters to cover it though — you'll have to do that for yourself.

As for long-term bottom lines, there is just one: The Democrats have a chance to decide, again, which side of the Real Resistance — the war against Rule by the Rich — they are on. Will they help mitigate the suffering of the American people, or continue to help worsen it?

Do mainstream Democrats have the courage to make this their slogan?

As I've written many times, this is one of our twin, approaching, inevitable tsunamis. The war against the wealthy will not end until one side finally wins, or until the global climate tsunami makes it moot. If mainstream Democrats, who still control the Party, are determined to remain on the wrong side of it, the consequences for the country will be nothing short of disastrous, a rolling civil war that seems destined never to end. A war that, in their arrogance, they will have fed.

Crossroads. We seem to be stuck at one.

GP